Palladium hit a record high on Wednesday after breaking the $1,500 barrier for the first time due to tight supplies, while gold topped a 10-month peak on hopes of a US-China trade truce.

Spot palladium, which traded as high as $1,502 per ounce, was up 1.4 per cent at $1,499.50 at 1307 GMT.

“There is a lack of supply in the market and demand is very high,” said Afshin Nabavi, senior vice president at MKS SA, citing low supplies from major producers Russia and South Africa.

The supply deficit is likely to widen this year as stricter emissions standards increase demand for catalytic converters, autocatalyst manufacturer Johnson Matthey said last week.

“Environmental requirements are getting stronger, which means more palladium is needed in (manufacturing) a car,” said Yuichi Ikemizu, Tokyo branch manager at ICBC Standard Bank.

Palladium is additionally supported by the fact that a broad-based substitution from palladium to platinum was not immediately feasible, analysts said.

Both metals are primarily consumed by carmakers in catalytic converter manufacturing, but platinum is more heavily used in diesel vehicles that have fallen out of favour since the Volkswagen emissions-rigging scandal broke in 2015.

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